OTTAWA–The Conservatives have been under fire for two weeks now over an advertising scheme in the last election that could cost taxpayers close to a million dollars.

OTTAWA–The Conservatives have been under fire for two weeks now over an advertising scheme in the last election that could cost taxpayers close to a million dollars.

Flush with cash in the 2006 election and facing an $18.3 million spending cap, the Conservatives' central campaign was looking for other places to spend money.

So, it transferred a total of $1.3 million to local campaigns.

Elections Canada has said the candidates immediately sent the money back to the party's head office to pay for television and radio advertisements.

The ads were identical to national television and radio spots, except for print in the final frame that either listed ridings or the names of candidates.

At least 66 Conservative campaigns participated in this "in and out" transaction and then sent these expenses off to Elections Canada for a 60 per cent taxpayer-paid-for rebate totalling some $780,000.

All federal political parties depend on this rebate to help finance the next election.

Chief Electoral Officer Marc Mayrand put the brakes on the campaign filings, saying the candidates could not prove that local television and radio advertising expenses were for their local campaigns.

Despite suggestions otherwise by some critics, there is no suggestion of criminal wrongdoing, only violations of the Elections Act.

Insisting they did nothing wrong, the Conservatives have taken the case to Federal Court, looking to get the decision overturned and payment made of the money the party believes it has coming to it.

The opposition Liberals can smell blood.

Ever since Parliament resumed Oct. 17, they have been hammering the Conservatives over what they compared in the House of Commons to "a money laundering scam."

Liberal Leader Stéphane Dion has consistently asked Prime Minister Stephen Harper how much he knew about the scheme, and when did he know it.

The only time Harper responded, he challenged the Liberals to make their accusations outside the chamber where they were not protected from parliamentary privilege.

"We happen to believe that our election financing activities are entirely legal. We know they are because they are what the law permits and they are in fact consistent with the practices of other political parties in Canada," government House Leader Peter Van Loan told the House of Commons this week.

Deputy Liberal leader Michael Ignatieff disputed this during question period, calling it a plot to recycle party money: "It's a scam."

Asked by the Toronto Star if the Conservative party had transferred money like this in previous elections, Van Loan stated: "Everything that we do conforms with the Elections Finances Act ... the law allows transfers."

Ann O'Grady, the Conservative Party's chief financial officer, could not be reached for comment.

Liberal MP Garth Turner recalls that when he was still with the Conservatives, the riding association in Hull-Aylmer in March 2006 talked openly about a money transfer.

"I was asked to be the guest speaker ... but before I gave my speech the treasurer gave their report for the annual meeting and they had more than $40,000, which was transferred into their bank account and then the same day they wrote a cheque back to the central party. And by transferring $40,000 into their bank account during the campaign they got a 60 per cent rebate," said Turner, who was kicked out of the Tory caucus earlier this year.

Actually the amount transferred to the western Quebec riding across from Ottawa was $48,558.55 and it was transferred back four days later. But Elections Canada is withholding the rebate along with several others until the outcome of the Federal Court decision

"Of course they didn't spend it on the campaign, they just gave it back, labelled it as advertising and then booked it as an expense ... that's at least $24,000 that the taxpayers gave the Hull-Aylmer Conservative Riding for doing (nothing) – for writing a cheque."

The most vocal critic of the Conservative scheme is MP Dominic LeBlanc (Beausejour), the Liberals' intergovernmental affairs critics.

LeBlanc ratcheted things up this week by issuing a list of former Conservative candidates and officials implicated in the "scandal" who were given federal appointments or hired for so-called high-profile jobs. "One has to wonder if there is a connection between their willingness to participate and employment by this Conservative government," he said in a press release.

That prompted a warning letter from the Conservatives' lawyer McFarlane Lepsoe: "This letter is ... intended to serve as a notice that it is defamatory to suggest or imply that the positions that these individuals have or have had on ministers' staffs are `rewards' for having engaged in illegal conduct."

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